Volvo looks to Belgium for guarantees

May 14, 2009

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By , STOCKHOLM, May 14 – Volvo Cars will ask Belgian authorities for guarantees on a European Investment Bank loan after Sweden broke off similar talks earlier this month, chief executive Stephen Odell said in an interview on Thursday.

The Swedish carmaker, owned by US giant Ford, had been in discussions with Stockholm to act as guarantor for 200-million-euro (266-million-dollar) loan from the EIB.

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Volvo Cars has a factory in Ghent in Belgium\’s Flanders region and Odell said the company will now ask the Flemish government to back their application, while hinting the result of those talks could influence where new models are built.

"It is clear that a loan guarantee from Belgium could affect our future decisions on the location of production and product development," he told the Swedish business daily Dagens Industri.

"I cannot allow Volvo Cars to be at a disadvantage against competitors who have the backing of their governments…I must do something," Odell said.

"The opportunities in Belgium are greater in the short term. They also have a more flexible system that increases capacity to retain more employees," he added.

However, the chief executive stressed the company had no plans to close its factory in Torslanda, just outside Gothenburg in southwestern Sweden

"Volvo\’s DNA is found in Sweden," Odell was quoted as saying.

On March 12, the European Investment Bank granted 3.0 billion euros in loans to a number of European carmakers, 200 million euros of which was earmarked for Volvo Cars.

But the securing of those loans was dependent on the Swedish government agreeing to act as a guarantor, leading the company to intensify discussions with the Flemish authorities.

Volvo Cars spokeswoman Maria Bohlin told AFP initial talks had been held with officials in Flanders earlier this year.

Volvo Cars has been a separate company from the Volvo Group, the truckmaker, since it was acquired by Ford in 1999 for 6.45 billion dollars.